Oil price, BP, Zenith, Faroe, Gulfsands, Empyrean, Ophir, Amerisur, Links And finally…
WTI $63.73 -$1.09, Brent $69.15 -$1.11, Diff -$5.42 -2c, NG $3.13 -7c
A down day after the Martin Luther King holiday, probably a bit of a technical correction, $65 and $70 seemed a little rich for the money managers with over a bill tied up in oil…But comments by Russian Oil Minister Novak should have calmed their nerves, he said that the deal must continue as the oil market is still oversupplied or ‘not yet in balance’ to use his words.
The reports will start to come out tomorrow and after, bet on the US production rise being the key point, if you believe that will make a difference you should chuck out another lump of your long. I bet none of them will say that although US production is up again it’s all ok as the sherberts have already sold forward quite a lot at the wrong price…
No, the worst news yesterday was when SocGen, Morgan Stanley, BAML and the Vampire Squids all increased their 2018 oil price guesses, after that for them it was up to bed with no tea…
Like when Christopher Columbus pronounced that the world might be round, they all laughed, when I suggested six or seven years ago that BP might have to cough up ‘in excess of $58bn’ for the Macondo disaster, they all laughed, they are not laughing now. I was one of a small band of people who worked out that in a litigious society where the perceived enemy was considered fair game, BP was on a road to nowhere.
So it comes as no great surprise that yesterday they added up the numbers again and got to $65.1bn+ for the charge for Deepwater Horizon. Ironically it led to BP starting the asset sale process earlier than others, so were ahead of the competition but it also meant that some of the family silver now resides on the wrong side of the salt, so to speak. My preference for Shell during this time is partly management, where quality will out, but partly as during the oil price crash they were able to hold their breath and buy BG right at the bottom, coupled with that acquisition giving them a chance to restructure, has left them very much in the driving seat.
My recent visit to Zenith in Azerbaijan has at least meant that when announcements about wells are made I can picture the scene, today is no different, the Z-21 workover was demonstrated by the excellent Mike Palmer on site before Christmas. So, the workover began yesterday and the coiled tubing unit has been mobilised and will aim for TD of 3,982m where wellhead pressure has built up to 4,300 psi. On Z-28 the company are awaiting ‘imminent delivery’ of resin compounds needed to seal the wellhead after which activity will start here as well.
Right at the top of the bucket list you will find Faroe Petroleum, since Ithaca it has been the poster boy of the E&P sector with its historical excellence in drilling success and track record in on time delivery. Today they announce 8 new prospective exploration licences (4 as operator) in the Norwegian North Sea which as they say, ‘further consolidates their position in the core areas on the Norwegian Continental Shelf’. With existing discoveries being worked on and a material 2018 drilling programme under way I would suggest that there are plenty of reasons to be cheerful, at least if you had a rock band it might be your theme tune…
GPX has announced that it has drawn down the final £1.6m of its secured term financing facility which it believes, with the ‘rigorous attention to cost cutting and capital efficiency’ will last until at least the middle of the year. At some stage the company expects to seek equity financing which should be easier post the excellent remedial work done on the company by MD John Bell.
EME announce today that production and sales from the Dempsey well in California have commenced at a rate of 140 mcf/d. The operator is proceeding with the application process for enhanced reservoir stimulation expected to start before long. The market has taken the red pen to the EME share price but probably because they, maybe like me, have absolutely no idea what is going on in this well which on the way down was burning the barn down, less so now.
Yesterday Ophir had a trading update and stated that the company ‘has reached financial stability’ which is a fair bit more upbeat than I have seen from them lately. Maybe its just a new form of words but having just spent some time with Nick Cooper I think it sums up the feeling that Ophir is in better condition than sometime they get given credit for.
The company ended 2017 with increased gross liquidity and ‘considerable discretionary capital available for investment’, obviously some of this is earmarked for Fortuna but there is enough to make a difference elsewhere in the business. They rightly say that this investment could generate significant cash flow growth and maybe I hadnt spotted this light under a bushel. Negotiations on the funding of Fortuna continue but I am confident that they have enough equity available to do a good deal especially if you look longer term.
Yesterday I took the chance to use my Core London interview slot to have a chat with Amerisur Chairman Giles Clarke, it was a most interesting discussion and the link is below:
On Monday I did my regular Podcast on Voxmarkets, here is the link:
Last night there were a few FA Cup replays in which the Hammers and the Foxes just about got through as did Cardiff, Sheffield Wednesday and Reading. Tonight Chelski host the Canaries, Swansea v Wolves will be tough and Wigan entertain the Cherries.
He’s back! A day or so after being charged with affray Ben Stokes is packing his bags and of to start playing one day cricket for England who have decided that they can’t hold him back any more…